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Perspectives

How to Turn F&A into a Business Value Function (Part two in a two-part series)

2019-03-13


Businesses expect CFO organizations to create new value in addition to keeping the books.

Even as organizations expect CFOs to deliver predictive insights as well as accurate historical records, the rise of digital finance capabilities enables finance and accounting (F&A) data to be leveraged in new and incredibly valuable ways. Levers like smart analytics, intelligent automation and experience design enable real-time enhancement of company-wide operations and smoother execution of business strategies. CFOs should take a synchronized approach to evolve legacy and disjointed F&A systems from merely keeping the books to driving business value creation. Here are the key steps to take.

  • Redefine the target operating model.

    CFOs need to lead the redesign of the global operating model to enable agility and digital empowerment of finance in times of changing business needs. This includes reimagining key processes and developing a well-defined digital roadmap for transforming different functions using analytics, automation, platforms and process redesign — all guided by new-age metrics focused on customer experience, automation and visibility.

    For one international pharmaceuticals manufacturer, a new operating model required global process blueprints that would enable the redesign and standardization of processes across 22 entities in 10 countries. The manufacturer also needed an integration playbook to facilitate the integration of five acquired businesses and future mergers and acquisitions. Its solution included a digital F&A platform delivered as a service with a plug-and-play orchestration layer that enabled easy integration of 10 unique enterprise resource planning (ERP) systems. Such standardization and orchestration ensured the company could operate as an integrated whole to enhance efficiency, gain scalability, and improve performance on spend, working capital and revenue enablement. As a result, the company reduced total cost of operations by 50% and gained $45 million in business value.

  • Apply digital ways of working.

    Transactional finance, intake management, reporting, analysis and decision support all can be streamlined through reimagining the redesign of processes with digital capabilities. Such service redesign incorporates autonomous and assisted robotic process automation (RPA) at scale, and artificial intelligence (AI)-aided analysis and processing combined with platform efficiencies. These digital tools enable more efficient workflows and capture data for strategic purposes. In accounts payable, physical receipts as well as manual data capture, invoice validation and approval can be replaced by electronic transmission, intelligent data extraction and validation using optical character recognition (OCR) with AI and digital workflows enhanced with machine learning.

    By re-engineering its key finance processes and simplifying and automating financial control tasks and processes, a global financial services company achieved same day profit and loss (P&L) delivery. Further, it accelerated period-end closing by five days, a 40% improvement, and reduced late posting time by 99%. Key levers were cognitive and rule-based automation, an intelligent P&L automation tool, and standardization and consolidation of product-control and cost-control processes. The company improved its ledger and reporting accuracy and timeframes and achieved more than 40% reduced operating costs.

  • Connect instead of replacing.

    Instead of replacing legacy ERPs and other systems, platforms with rich application programming interface (API) layers enable organizations to gather and harmonize data from those underlying systems into a single view. A water technology company had more than 80 ERP instances in 20-plus countries due to frequent acquisitions. Instead of building a new, single, and integrated ERP, the company chose a cloud integration layer for real-time data exchange among the ERPs and business-user engagement systems. The layer incorporates APIs to tap data in the underlying ERPs. This strategy helped the company avoid capital investment costs while saving $35 million. The improved transaction processes enabled by the connected ERPs and best-in-class systems of engagement, RPA and global consolidation helped the company to derive $25 million in business outcomes (for example, through improved days sales outstanding) and 50% savings in total cost of operations.

  • Increase consumption of data and insights generated by F&A.

    Once systems are integrated and processes standardized, dynamic dashboards and enterprise analytics accessible on demand can be used to generate insights and decision support from financial data. Consolidated views of days-sales outstanding, paid-on-time percentages, cash-flow movement, processing costs and other performance measures all become available on demand.

    Once the previously cited global pharma manufacturer’s ERP instances were synchronized, managers and leaders could access key operating metrics through integrated dashboards for a holistic and accurate view of business performance. Similarly, the water technology company consolidated all data from its connected ERPs into one CFO dashboard, so managers and executives could have a clear, reliable view of overall business performance.

Figure 1

With capabilities like these, CFOs can transform finance and accounting, giving it the speed and agility necessary to do business at a digital pace. Such abilities, coupled with finance expertise, will make the CFO organization a trusted advisor throughout the business.

For more information about the value that modern finance and accounting functions should deliver, read part one in our series, “Five Signs Finance and Accounting Systems Are Falling Behind the Times and visit the Digital Finance and Accounting section of our website.

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How to Turn F&A into a Business Value Function (Part two in a two-part series)